Develops a methodology for the analysis of signal quantization effects in dyadic subband tree structures using the gain-plus-additive noise model for the pdf-optimized quantizer. The authors constrain the non-quantized and uncompensated structure to be PR (perfect reconstruction). They develop an equivalent polyphase structure, and compute the MSE (mean square error) using cyclostationary concepts in terms of (1) the allocated quantizer bits, (2) the filter coefficients, and (3) an embedded compensation parameter vector K~. This MSE is then minimized over all three items above. The optimization method is applied to the specific case of a four channel dyadic tree. This tree is represented by an eight channel polyphase equivalent whose interchannel signals are correlated. The design of a 4-tap paraunitary structure is confirmed by simulation.<>